As treaties and trade agreements are implemented this year, more U.S. companies are looking at the Association of Southeast Asian Nations for fresh business opportunities. Fortunately, a whole host of logistics and transportation service providers are laying the groundwork to overcome inherent infrastructure challenges.

Today, U.S. trucking companies face more regulations than any time in history—and they claim this “regulatory tsunami” is putting the clamp on U.S. productivity. During this session shippers will gain a better understanding of the current state of trucking regulations (HOS & CSA) and the impact they're having on capacity and rates.

By John D. Schulz, Contributing Editor and Jeff Berman, Group News Editor
November 21, 2013

Financially ailing YRC Corp., parent of the second-largest group of LTL carriers, is asking its 26,000 Teamsters employees to continue working at a 15 percent wage reduction and benefits cuts through 2018 in a labor proposal company officials have describe as vital to the future of the 87-year-old company.

The proposal is bittersweet, union members say. On one hand, they appeared grateful that the company wasn’t seeking further pay and benefit cuts from those in effect since 2009.

On the other hand, the company’s proposal underscores the dire financial straits of the YRC, which has more than $1.4 billion in debt. Some of that debt is at interest rates as high as 12 percent, costing the company at least $150 million in interest payments annually.

YRC CEO James Welch has told union leaders that without a restructuring, it will not be able to make debt payments coming due in the next 17 months. It has $69 million due next Feb. 15, with another $1.4 billion due in late 2014 and early 2015.

YRC officials say the company has more debt than the next seven-largest publicly held LTL carriers combined. Most of that debt was incurred during the regime of former CEO William Zollars, who engineered a pair of $1 billion, highly leveraged purchases of long-haul rival Roadway Corp. and USF Corp., a group of regional carriers.

YRC says it wants more “flexibility” in its labor contract, according to a memo of understanding leaked by the dissident Teamsters for a Democratic Union. What that “flexibility” really means is unclear. What is clear is that YRC, which has lost in excess of $2.6 billion in the last six years, needs these labor concessions in order to satisfy its lenders, a consortium of banks.

Tyson Johnson, co-chair of the Teamsters national freight negotiating committee and the union’s point man in talks with YRC, said in a conference call with union officials that specifics of the plan would come out in future negotiations.

In a memo of understanding (MOU) to union local leaders, YRC is asking workers to continue the 15 percent cut in wages and overtime pay the company won in 2009. Wage and mileage rate increases won from 2012 through 2014 would also be reduced by 15 percent, according to the MOU. Also, cost of living adjustment provisions of Article 33 of the National Master Freight Agreement “shall be suspended for the duration of this Restructuring Plan,” according to the MOU obtained by LM.

YRC’s overtures came after ABF Freight System, the nation’s sixth-largest LTL carrier, finalized a five-year deal with the Teamsters union that is projected to save the nation’s sixth-largest LTL carrier between $55 and $65 million annually. The new contract, covering about 7,000 ABF employees, is now ratified and will take effect on Nov. 3, 2013 and run through March 31, 2018. It contains about a 7 percent wage concession.

YRC said last month that consolidated operating revenue for the third quarter—at $1.253 billion—was up 1.3 percent annually, while consolidated operating income fell from $27.3 million to $5.8 million year-over-year. YRC said that the $21.5 million dip in operating income included a $1.3 million loss on asset disposals. And third quarter EBITDA—at $62.4 million—was down $16.4 million compared to $78.8 million a year ago.

YRC CFO and Executive Vice President Jamie Pierson said on the earnings call that the decline in EBITDA was due to the change in operations at the company’s biggest unit, YRC Freight, which was designed to continuously improve customer service by reducing the handling of shipments and excess time in transit and went into effect earlier this year. Pierson explained that the change in operations is currently hindering service and subsequently led to “some customer flight” in its higher margin channels. Another factor he cited was its driver shortage in which YRC had to pay a fair amount of overtime to its existing drivers, and in some cases, had to pay a third-party carriage carrier to deliver the freight.

YRC Worldwide CEO and YRC Freight President James Welch added on the call that the company is not pleased with its third quarter results.

“After exceeding our internal financial plan for 8 consecutive quarters with this management team around in 2011, we had a rather large steep up during the third quarter,” he said. Several different factors contributed to our overall disappointing performance.”

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The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that U.S. trade with its North America Free Trade Agreement partners Canada and Mexico in January dropped 1.2 percent to $89.3 billion.

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